FinTech IPO index rises 13% on Paya deal
In a rally that sent all names higher, the FinTech IPO Index rose 13.5% for the week.
It’s a milestone — the first time it’s happened since we’ve been tracking these more than three dozen names that have been released since just before the pandemic.
The rally underscores the positive sentiment that has gripped Tech, at least through the past five sessions. In part, that’s because investors are finding beaten-up names that seem to have at least some bounce; in part, macroeconomic data has been a support for this rally.
As PYMNTS reported on Thursday (January 12), there have been signs, through consumer prices, that inflation is easing slightly.
Inflation cools and stocks heat up
The implication here is that as inflation cools, the Fed will slow the pace of rate hikes – perhaps even pausing them. In that case, the margins fall somewhat. And in terms of overall sector performance, some relief from rising interest rates means home buying activity could pick up again, helping Opendoor, for example, jump 14% on Thursday, up nearly 50% over the past five sessions alone.
As inflation eases, at least for now, consumer-focused names, and those that rely on institutional loans to keep things afloat, also got a boost.
Affirm rose 32.7% since last week, followed by Upstart, up 32.3%. We want to know more about consumer sentiment, and the propensity to continue spending, when the earnings season is in full swing. Banks start reporting on Friday (January 13), so we’ll get some card-level data, which will at least be an overview of transaction growth.
If consumers prove resistant, it is a positive indication that they will be inclined to continue to embrace installment and other credit products that are designed to have somewhat more visibility/affordability when it comes to meeting monthly obligations.
Of course, the FinTech IPO crowd isn’t just riding on the heels of financial data alone. It was individual “stories” that helped strengthen the feeling throughout the final sessions. One story taking shape, even as early as 2023, lies in consolidation, as mergers could help reshape the payments landscape itself.
Paya surged 25% following news that it will be acquired by Canadian FinTech Nuvei in a $1.3 billion all-cash deal. Nuvei said at the time of the announcement that Paya integrations with more than 300 independent software vendor (ISV) platforms and commerce solutions will allow it to “capitalize on the domestic and global software-led market opportunity.” Paya’s customer base also includes B2B goods and services companies. The Nuvei share rose just under 21% during this time frame.
Some strategic initiatives
Separately, Blend gained more than 16%. The company said in an announcement this week that it is taking a number of initiatives to accelerate its path to profitability. These initiatives include cost reduction, partly related to staffing cuts.
The company said it was targeting a 28% reduction in Blend’s onshore employee base, affecting Blend Title and business operations. Blend also said it would allocate an increased portion of operating expenses to Blend Builder, the company’s configurable software platform, which “carries a subscription fee on top of success-based transaction fees. This platform is already the basis for Blend’s mortgage-free offer.”
Robinhood shares managed to gain 11.5% since the end of last week. The US Department of Justice has seized $465 million in shares that had been partially owned by former FTX CEO Sam Bankman-Fried. SBF, as he is known, allegedly wanted access to the Robinhood shares to pay legal bills.
PYMNTS data: Why consumers are trying digital wallets
A PYMNTS study, “New Payments Options: Why Consumers Are Trying Digital Wallets” finds that 52% of US consumers tried a new payment method in 2022, with many choosing to try digital wallets for the first time.
